Despite soaring salaries in the housebuilding sector, there’s an air of nervousness that the government will burst the bubble by scrapping its Help to Buy scheme
Most of us find salary surveys irresistible reading. Aside from being a benchmark for our own salaries, they are also seen as a barometer for the health of the sector we work in. So at first blush, this week’s housebuilder salary survey shows a thriving industry where pay packets among the executive tiers are still on the up and where the top 30 housebuilders have taken on 2,000 staff in the last year.
And an interesting twist on this year’s results is that the job titles associated with technical skills are demanding six-figure sums and have surpassed those of financial directors. So, for example, the average salary of a construction and building director hit £110k this year – which amounts to a 40% increase over five years – whereas FDs only brought home £99k (excluding those all-important bonuses).
The people in the shortest supply are clearly those with detailed knowledge of the construction process, as opposed to those with more generic finance, sales or development skills. The big housebuilders feel they are fishing from a small pond of talent and an inevitable consequence is that many are resorting to poaching from each other and in turn driving up salaries. You don’t have to be on the lookout for a job to get approached by increasingly desperate recruiters, and armed with an offer you can go to your boss and demand a mid-year pay rise. Not a bad outcome for the individuals concerned.
“There is a realisation that the private sector alone is not going to get the government its 300,000 new homes a year target”
Staff are not just benefiting from bumper pay packets; another positive knock-on effect is that companies are trying to up their game by being better employers and offering fast-track progression alongside enhanced training.
But there are signs that all is not as rosy as it first seems. Analysts are pointing to a “bear” market for the sector – housebuilders’ share prices have taken a kicking recently, and last week were down on average. Several of the big names have put warnings out on profits, including Crest Nicholson and McCarthy & Stone, while the fall in London house prices has been flagged by the likes of Berkeley.
There’s a nervousness in the air, perhaps reflected in the fact that this year’s average salary increase is slightly down on the previous year and in the jump in the number of firms expecting to cut jobs. The survey also reveals that Brexit is seen as the biggest threat to the market by 81% of respondents, up on 50% last year.
Caution is probably wise. This week the Construction Products Association (CPA) warned that its forecasts for growth in the sector were dependent on the government extending Help to Buy beyond 2021. Housing and infrastructure are the two pillars holding up construction growth, but without Help to Buy, the CPA says housing starts will fall away from 2019.
So why is the future of Help to Buy so uncertain? Basically the government has hinted heavily that it is reviewing its usefulness. Last month, the Telegraph ran a story that ministers were planning “a fundamental review” of the scheme, hinting at an announcement due soon and sending a shudder through housebuilder boardrooms. It seems that while Whitehall recognises that private housebuilders have supported an increase in output in recent years, Help to Buy is an expensive and not very targetted way to do it.
Housebuilders have shot themselves in the foot over this scheme – at the same time as they have received generous taxpayer hand-outs, they have awarded their execs eye-watering bonuses. At least that is the link that was made after Persimmon’s Jeff Fairburn was originally awarded a £110m bonus. Only this week Lib Dem leader Vince Cable has called for these bonuses to be capped under a voluntary code of conduct.
Aside from the cost, there is also a realisation that the private sector alone is not going to get the government its 300,000 new homes a year target. Hence the prime minister’s fresh interest in social housing, demonstrated by this autumn’s £2bn funding boost and the promised lifting of the local authority borrowing cap.
As Paul Hackett, head of the G15 housing association group, says, this new attitude is all in marked contrast to the blinkered focus on home ownership of David Cameron’s coalition government. But, Hackett is quick to warn, the extra £2bn does not match the nation’s affordable housing need. To do that, he argues, the government needs to stump up three times the amount annually. Yes, you would expect the head of a housing association group to say that, but the mismatch between what is being offered by a now supposedly sympathetic government and what is needed is one heck of a chasm.
So you can see how scrapping Help to Buy could be a tempting reallocation of government subsidy. Would it be painful? Definitely. But opponents of the scheme would say it was never meant to be a permanent intervention and it has only served to prop up house prices. Whatever your views, the priority must surely be to increase housing output and support one of the few areas of construction growth at this very precarious time. Rumour has it the scheme may well be extended beyond 2021 but it will only be a temporary reprieve. Housebuilders will be expecting as much, but they will be hoping the government – aware of how popular Help to Buy has proved in Tory constituencies – is merely planning to restrict the scheme, not kill it off.
Chloë McCulloch is acting editor at Building
Chloë McCulloch, acting editor, Building